Micro Foundations · intro
What moves on the Monopolistic Competition diagram
Entry steals customers from each incumbent until profit hits zero, the monopolistic-competition long run.
Your café earns profit on its loyal customers.
Three new cafés open on the same street, your demand curve slides inward.
Profit erodes toward the tangency: price just covers average cost. Differentiation delays this; it never prevents it.
Examiners ask this as: entry erodes demand, new competitors, cafe competition.
Other scenarios on Monopolistic Competition